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Advance Housing, Inc. v. Township of Teaneck

422 N.J. Super. 317, 28 A.3d 841 (App. Div. 2011)

TAXATION — There is no legal basis to deny a real estate tax exemption to a provider of integrated housing and support services just because its services are not exclusively provided to residents of its housing program.

A non-profit corporation and its subsidiary provided affordable, supporting housing and services for people with significant psychiatric disabilities. Both entities were exempt from federal income taxation as charitable institutions. The corporation and its subsidiary were formed to provide alternative to a group homes and to provide residents with affordable housing and comprehensive, flexible support services, including, medication monitoring, vocational training, budget assistance, and other services. The support services provided were available to all, but the frequency of use depended on the individual participant, although all who were residents received at least some of the services. The subsidiary was created to acquire and own the real properties in order to comply with HUD requirements concerning the acquisition of properties with HUD funds.

The corporation and its subsidiary provided housing and services in several municipalities. When a municipality refused to exempt their properties from real property taxes, they filed tax appeals with the county board of taxation. The corporation and subsidiary claimed exemption under four sections of N.J.S.A. 54:4-3.6, as follows: (a) provisions related to those who are “feebleminded,” “idiotic,” or “mentally retarded”; (b) provisions relating to the moral and mental improvement of men, women, and children; (c) the provision related to hospital purposes; and (d) the provision exempting properties that are actually and exclusively used for charitable purposes.

The lower court rejected the exemptions under the “feebleminded” and “hospital purposes” exemptions. As for the exemption for properties actually and exclusively used for charitable purposes, the lower court looked to the three-part test found in Presbyterian Homes of Synod of New Jersey v. Division of Tax Appeals, 55 N.J. 275, 283 (1970). It then determined that the corporation and its subsidiary had satisfied the first two parts, since they were organized for the particular purpose for which the exemption was claimed and they operated on a non-profit basis. However, the lower court required additional briefing in order to determine if the properties were actually and exclusively used for charitable purposes. After receiving the additional information, the lower court eventually found that they did not, and granted the municipality’s motion for summary judgment. The corporations appealed, and the Appellate Division reversed.

The lower court’s decision hinged on its determination of whether the housing and support services were two separate programs operated by the corporations or were a single, integrated, program that combined both housing and support services. The lower court found that, in order to be integrated, there needed to be some “institutional aspect” to the housing program. In this case, the lower court did not find such institutional aspect because: (a) the majority of the clients of the corporation who received supportive services did not live in the housing; and (b) the residents were not obligated to use the supportive services made available.

In the appeal, the Appellate Division disagreed with that finding. First, it found that there was no legal basis for requiring a provider of integrated housing and support services to provide the services exclusively to residents of the housing program. Second, it agreed that not requiring residents to use the support services was troubling, but not dispositive, since the record indicated that all of residents actually received support services. The Court was satisfied that the level of services provided to the clients varied by need, and no public policy would be served by requiring a client to receive services she or he did not need.

In this case, the properties were being used exclusively in furtherance of the operator’s stated purpose of providing housing and support services. Therefore, the corporations were entitled to a property tax exemption for their properties.

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